New regulations are not enough to fix Ontario’s precarious employment problem

September 06, 2016

Although the nature of work is changing and becoming less stable for Ontarians, the Employment Standards Act (ESA) has not been updated in 16 years. The Ontario Ministry of Labour is in the process of updating this important piece of legislation, which sets the rules for employment contracts, including hours of work, holidays, and the minimum wage.

The recent release of The Changing Workplaces Review: Special Advisors’ Interim Report marks the conclusion of the first stage of the Ministry of Labour's consultation process. The report outlines the growing trend of precarious employment in Ontario and proposes an abundance of potential new regulatory options, but regulations alone can be ineffective and inefficient. Businesses can benefit from taking an active role in improving job quality and the government should support their efforts.

Growing precarious employment

Precarious employment is marked by instability and defined as temporary or part-time employment at low wages, below that of the Low Income Cut-Off (LICO). It often involves nonstandard relationships between workers and employers, such as project-specific, temporary employment contracts.

Since the implementation of the ESA in 2000, employment growth in precarious employment has outpaced total employment growth (See Exhibit). Between 2000 and 2015, total employment in Ontario grew by 19 percent, but the precarious employment subcomponents have grown more rapidly. Positions that are temporary (grew by 45 percent), involuntarily part-time (grew by 68 percent), or self-employed with no employees (grew by 27 percent) are all considered part of the growing shift towards precarious employment in Ontario. Each of these categories presents a unique challenge and limits an individual’s protections under the ESA, exposing them to greater financial instability.

Employee misclassification

One such issue is misclassifying employees as contractors to avoid business costs, such as overtime pay and premiums for employment insurance and the Canada Pension Plan. This trend is most evident in the high profile disputes between tech companies and those who make their living from these platforms, such as the lawsuit between Uber and its drivers.

Better jobs can benefit businesses and workers

The Ministry faces the difficult tasks of balancing protecting employees with supporting the competiveness of Ontario’s businesses. Regulation through the ESA is one way for Ontario to address precarious employment, but it can be ineffective and inefficient. In 2015, Ministry of Labour inspections focused on precarious employment and found that more than 75 percent of businesses did not comply with the existing ESA standards. One thing is clear: legislative updates will not have a meaningful impact if business do not adhere to them.

It is more effective and efficient to target the underlying pressures and align the interests of businesses and employees than it is to rely on the government to force employers to comply. In Untapped Potential, the Institute outlined a number of initiatives businesses and governments could implement to reduce precarious employment that would also benefit businesses, which include:

Improving job quality, such as boosting the creativity content of jobs, can reduce the costs to firms associated with poor worker health, absenteeism, and disengagement.

Encouraging employee development and career progression for workers would allow firms to internally develop employees with both front-line experience and the necessary skills to fill upper-level positions.

Providing language training for immigrants and improving the process for recognizing and updating foreign qualifications would reduce occupational mismatch and underemployment.

Updating the ESA is an important component of addressing precarious employment, but no matter the outcome of the review process, legislation will not be enough to solve the problem. Ontario’s government and businesses should ambitiously and simultaneously pursue efforts to address the underlying causes of the growth in precarious employment.